The Least Developed Countries Report 2012 focuses on how the world’s poorest countries can benefit further from the billions of dollars their ex-patriots send home from jobs overseas – and on how to counteract “brain drain.”

​The report, published today, notes that nationals of the globe’s 48 LDCs sent home some US$27 billion in 2011. It recommends that LDC governments should strive to employ this vast resource – which largely goes in private transfers directly to families – to improve the breadth and abilities of their economies.

It suggests that these nations take steps such as improving domestic banking and financial services, so that a greater proportion of such money is available for investment, small business development, and job creation for increasingly urbanized populations who cannot depend for their survival on farming.

And it says it is important to reduce transfer costs. Remittances sent to LDCs are charged a rate roughly one-third higher than the rate charged for most international money transfers. These fees run as high as 12% of the amount transferred. Remittances sent to sub-Saharan Africa in 2010 could have generated an additional $6 billion for recipients if the costs of sending the money had matched the global average.

Remittances have great promise for supporting durable economic growth in LDCs because they are both a substantial and a reliable source of income, the report notes. Remittances continued to increase during and following the global financial crisis, for example, even as investment and tax revenues declined. Remittances are forecast to continue to grow over the medium term.

The Least Developed Countries Report​ further offers ideas on how LDCs can compensate for the loss of so many of their highly educated citizens who leave for jobs abroad.

The “brain drain” statistics for the world’s 48 least developed countries (LDCs) are stark: among people from LDCs with a university-level education, about one in five leaves for employment elsewhere, as compared with one in 25 in the case of developed countries. The brain drain rate is highest of all for the LDCs, at 18.4 per cent; this is well above the 10 per cent rate for other developing countries, the Report says. Six of the 48 LDCs have greater numbers of highly skilled nationals living abroad than at home. It is estimated that the total of such emigrants now numbers over 2 million.

To counter these negative effects, UNCTAD proposes a new international support mechanism aimed at enabling highly skilled members of LDC diasporas to contribute to specialized knowledge transfer and to channel investment to their home countries.

The proposed knowledge-transfer scheme – to be called “investing in diaspora knowledge transfer” – consists of a financial instrument that would target nationals of the LDCs who live and work in foreign countries. It would seek to enlist members of this group who “are willing to invest in knowledge creation and learning in home countries”.

It would aim to enhance potential benefits from members of the diaspora who “have expertise in a specific field with high knowledge content which is amenable to enterprise development and could contribute to building productive capacities” in their home countries, especially in middle- to high-level technology industries (such as machinery, information and communication technology, and biotechnology) and skill-intensive activities (such as engineering and consultancy).

The term “productive capacities” refers to the ability of an economy to produce competitively greater varieties of goods and services, of greater sophistication. UNCTAD has contended for some years that improving LDCs’ productive capacities is the key to enabling them and their populations to achieve long-term economic growth and to escape poverty.